The Supreme Court ruled that government land allotments to charitable trusts under statutory schemes are not absolute sales, allowing the State to impose usage conditions. It held that Section 10 of the Transfer of Property Act (restricting alienation conditions) does not apply to such allotments, as public interest overrides private contractual principles. The Court emphasized that violation of allotment terms (e.g., unauthorized commercial use) justifies land resumption without compensation, branding such breaches as “fraud on statute”. The judgment reaffirmed the State’s authority to enforce conditional grants for charitable purposes under revenue laws.
Facts Of The Case:
The case involved a dispute over 3.01 acres of government land in Telangana allotted to Dr. Pasupuleti Nirmala Hanumantha Rao Charitable Trust in 2001 under the Telangana Alienation of State Lands Rules, 1975. The allotment was made for charitable purposes, subject to conditions including: (1) use only for the allotted purpose, (2) completion of construction within two years, and (3) plantation of trees. The Trust paid market value but later executed a General Power of Attorney (GPA) in 2011, concealing the allotment terms, and illegally subdivided the land into a residential colony (“Eden Orchard”), selling plots to third parties. The State issued a resumption order in 2012, citing violations.
The Trust challenged this, claiming absolute ownership under Section 10 of the Transfer of Property Act (TPA), arguing that post-payment, the land ceased to be government property and conditions were void. The Telangana High Court upheld the Trust’s claim, ruling the restrictions unenforceable. On appeal, the Supreme Court reversed the decision, holding that the transaction was a conditional allotment (not a sale) under statutory rules, and the Trust’s commercial misuse justified resumption. The Court condemned the GPA as fraudulent and reiterated the State’s authority to enforce public-purpose conditions.
Procedural History:
The dispute originated when the Telangana government issued a resumption order in 2012 to reclaim land from Dr. Pasupuleti Nirmala Hanumantha Rao Charitable Trust for violating allotment conditions. The Trust challenged this before the Telangana High Court, which ruled in its favor (2014), holding the conditions void under Section 10 of the Transfer of Property Act (TPA). The State appealed, but the Division Bench upheld the decision (2022). On further appeal, the Supreme Court (2025 INSC 679) reversed the High Court’s judgment, emphasizing the statutory nature of the allotment and the State’s right to enforce conditions. The SC declared the Trust’s actions a “fraud on statute” and validated the resumption, restoring the government’s authority over conditional land grants.
Court Observation:
The Supreme Court made several critical observations in its judgment. It emphasized that government land allotments under statutory schemes are not absolute sales but conditional grants for specific purposes, distinguishing them from private transactions governed by the Transfer of Property Act. The Court held that Section 10 of the TPA, which voids conditions restraining alienation, does not apply to such allotments, as public interest overrides private contractual principles. It noted the Trust’s deliberate concealment of allotment terms in the General Power of Attorney (GPA) and its unauthorized commercial use of the land (developing a colony) as a “fraud on statute”, violating the charitable purpose clause. The Bench reaffirmed the State’s authority to impose and enforce conditions under revenue laws, including resumption without compensation for breaches. The judgment underscored that public trusts cannot exploit conditional allotments for private gain, and such misuse justifies stringent action to safeguard public assets.
Final Decision & Judgement:
The Supreme Court delivered a decisive judgment in favor of the State of Telangana, overturning the High Court’s rulings. The Court categorically held that the land transaction constituted a conditional allotment under statutory government schemes rather than an absolute sale, thus placing it beyond the purview of Section 10 of the Transfer of Property Act. Emphasizing the distinctive nature of government land grants for public purposes, the Bench ruled that such allotments inherently carry enforceable restrictions that serve public interest. The Court found the Trust’s actions – particularly the clandestine execution of a General Power of Attorney omitting critical allotment conditions and subsequent commercial exploitation of the land through unauthorized colony development – amounted to a deliberate “fraud on statute.” This egregious violation of the charitable purpose mandate, coupled with the Trust’s mala fide conduct, fully justified the State’s decision to resume the land without offering compensation for any improvements. The judgment reinforced the government’s sovereign authority to reclaim misused public assets while sending a strong deterrent message against the misuse of lands allotted for charitable objectives. All pending interlocutory applications were disposed of accordingly, bringing finality to the protracted litigation.
Case Details:
Case Title: State of Telangana & Ors. vs. Dr. Pasupuleti Nirmala Hanumantha Rao Charitable Trust Citation: 2025 INSC 679 (Supreme Court of India) Appeal Number: Civil Appeal No. 5321 of 2025 Date of Judgment: May 14, 2025 Bench: Justice Manmohan & Justice Dipankar Datta
Download The Judgement Here